A new report examines how the environment has – or has not – been incorporated into the government’s ‘Wellbeing Budgets’.
The Parliamentary Commissioner for the Environment report says that measuring the value of the environment and its links to wellbeing is not easy, and it is understood in different ways across Western and te ao Māori thinking. The report includes recommendations to improve the way environmental considerations are handled in the budget process.
The SMC asked experts to comment on the report.
Professor Paul Dalziel, Deputy Director, Agribusiness and Economics Research Unit, Lincoln University, comments:
“Is our natural environment well served by the way the government prepares its budget every year? This report answers no, despite the government’s recent shift to wellbeing budgets.
“Similar concerns echo around the world. In 2015, for example, world authority Sir Dieter Helm observed that current policies are ‘utterly feeble’ when confronted with the scale of environmental destruction coming down the track.
“It does not have to be this way. In 2017, Parliament gave legal standing to the Whanganui River as a person. That example illustrates our awareness that the natural environment must be heard when decisions threaten its mauri and integrity.
“The report offers practical steps for achieving this in the budget process. Taking these steps would move New Zealand further down the path towards a genuine wellbeing economy that enhances the mana and dignity of planet and people.”
Conflict of interest statement: “The AERU offers research services on wellbeing economics to external clients of Lincoln University. Professor Paul Dalziel works closely with Dr John Reid, who provided a chapter in the report.”
Associate Professor Sara Walton, Department of Management, University of Otago, comments:
“The latest PCE report on well-being and the environment raises key concerns with the current measures and outcomes of the environment under the well-being framework.
“It provides a useful starting point for an Aotearoa-NZ-wide conversation on how we might perceive the relationships between humans and the environment. How we understand well-being and incorporate a Te Tiriti approach to both well-being and the conceptualisations of the environment. Such conversations are overdue and should help in being able to generate better data and measures to enable environmental well-being in Aotearoa to be at the forefront of policy and decision making.”
No conflict of interest.
Dr Viktoria Kahui, Senior Lecturer in Environmental Economics, University of Otago, comments:
“The Parliamentary Commissioner for the Environment provides a timely report on the role of the environment in Wellbeing budgets.
“The report starts with the concept of wellbeing, which sits at the centre of the government’s wellbeing budget. The meaning of the term is typically left open, but studies often focus on either subjective measurements (such as surveying people about their happiness in life) and/or objective measurements (such living standards). The report juxtapositions the meaning of wellbeing to te ao Māori (Māori world) view, which is very carefully explained to focus on the connection with all things, animate and inanimate, across space and time, through whakapapa (genealogy).
“It is refreshing to see so much care and detail spent on describing the differences between te ao Māori view and the anthropocentric foundation of the Living Standards Framework (LSF), in which the environment is only valued for its relevance to human wellbeing.
“This difference is highlighted by the absence of the intrinsic value of nature in the 2021 LSF. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), a leading international governance platform, represents the value of nature as intrinsic (nature for nature), instrumental (nature for society) and relational (nature as culture). Also, feedback to the Treasury shows that many people would prefer an ecocentric representation of the LSF where all social and economic activity is embedded within the natural world. And most importantly, this fits with the new Māori framework He Ara Waiora, which focuses on the relational component between people and the environment. Wellbeing is derived from a healthy environment but also from caring and protecting the environment, it is reciprocal, and reducing ecosystem goods and services to ‘use’ benefits fails the capture the spiritual value as well as the intrinsic worth of nature.
“In chapters 3 to 6, the report discusses the budget process and the environment, the environmental challenges to wellbeing and ways to improve budget decision making. The overwhelming impression is that New Zealand’s environmental reporting system lacks data, structure, usability and vision, and therefore provides very little meaningful information to policy makers who have to make important intra- and inter-generational trade-offs. This problem is compounded by the complex interactions between humans and the environment, across time, space, stakeholders and ecological thresholds. The Commissioner provides a range of recommendations to improve budget decision making, focusing on improving the presentation and communication of critical environmental information and the adjustment of the social discount rate in cost benefit analysis to give larger weight to future generations. The overarching conclusion is to examine the way long-run environmental issues are handled in the budget priority setting process.
“These are all important recommendations. What is missing is, however, is the explicit recommendation for adopting te ao Māori view as the basis to the 2021 LSF. At the moment, the anthropocentric basis of the 2021 LSF sits awkwardly next to the He Ara Waiora framework. In 2017, the Government granted legal recognition to the intrinsic value of the Whanganui River as a source of spiritual and physical sustenance. This is an example of how a Māori perspective to environmental protection beyond its use to humans can work, and has already been copied by Quebec’s Magpie River. Such a shift in worldview will affect the budgetary process by shifting funding priorities to facilitating environmental protection through bottom up collaboration that involves community, tangata whenua and other stakeholders. This is in line with the He Ara Waiora framework, where wellbeing is derived from being able to care and look after the environment. Local and national governance arrangements that organize themselves around the intrinsic value of an ecosystem could be a game changer, it is time to shift our worldview.”
No conflict of interest.
Troy Baisden, Principal Investigator, Te Pūnaha Matatini; co-president of the New Zealand Association of Scientists; Honorary Prof. School of Environment, University of Auckland; and Affiliate at Motu Research, comments:
“Since taking on the role of Parliamentary Commissioner for the Environment (PCE), former Cabinet Minister Hon Simon Upton has followed a clear path in getting to this report. His office’s sequential investigations have turned over a worrying set of stones that form the path for informing and making current and future decisions on the state of our environment. The clear findings have been that we don’t have good enough science on the state of the environment, nor the processes to get it and use it to design policy. His office now examines whether the Budget processes designed in 2019 to include well being measures are improving the situation, and finds hopeful prospects that are far from assured.
“At the root of the problem is a perspective of limited resourcing taken by governments over the past 30 years, generating a clear “Catch 22”. We don’t fund environmental monitoring because we don’t know how to include the information it produces in key decision making, of which the Budget process is clearly one of the most important. Yet, despite new willingness to include that information, we can’t include it well because we simply don’t have the information that’s needed on the environment. Valuably, the PCE reminds us that incorporating the way Māori think about well being of both people and the environment will help, and is also compatible with the Living Standards Framework underlying well being assessment in Budget processes. The report reinforces my perspective that we need ‘whole systems’ approaches to understanding big problems, rather than breaking them into manageable pieces.
“To incorporate environmental science in this type of analysis, the PCE correctly suggests that one of three forms of analysis is commonly used. Firstly, the quantities are already valued in markets as different forms of energy already are, and many greenhouse gas emissions now are. Or there may be non-market valuation of flows and beneficial services provided by the environment, and lastly of capital accounts which represent stocks best left intact, such as uncut forests. However, the analysis doesn’t consider how we can consider rapid expansion of the first category. That’s important because we now see growing potential for impact investment, and divestment driven by risk. Among environmental scientists, Professor Dave Frame’s group has pioneered thinking that science needs to shift toward informing the financial sector, Treasury and the Reserve Bank, and focus less on regulatory policy. I suggest the report could have focused more on such examples, but perhaps there is the opportunity for a separate future investigation given the recent implementation of some of the world’s first legislation on financial-risks and disclosures.
“Important recommendations from the report include the development of new tools, including a full assessment of Sustainability featuring five different components. This effort could aim to replace, rather than add to the evaluation of Resilience, which is an ecologically and environmentally valid concept that has proven difficult to confirm in practice. Ultimately, this report has to be taken as part of an era where New Zealand is analysing and aiming to reconfigure major parts of how we manage and measure health, the environment and govern science, research, innovation and associated analysis. From responding to the pandemic, to preparing for climate change, the best time to be considering major changes examined in this report was decades ago, but the next best time is now.”
Conflict of interest statement: “No conflict of interest beyond government research funding sources and related contact with the PCE’s office.”
Professor Arthur Grimes, Professor of Wellbeing & Public Policy, School of Government, Victoria University of Wellington; and Senior Fellow, Motu Research, comments:
“This is one of the most thorough and cogently argued reports that I have read by a government agency in many years. It makes important points about the long-term importance of the environment (whether viewed through an anthropocentric lens or more widely). It also makes strong points on how environmental issues mesh with a wellbeing perspective for policy, and makes relevant recommendations for improvements in the policy process.
“A key aspect of the report is its emphasis on ensuring that future outcomes are not placed in jeopardy by overweighting contributions to current wellbeing at the expense of future wellbeing. As the report emphasises, the ‘social discount rate’ now adopted by Treasury (a real rate of 5% p.a.) means that policies are currently designed to benefit near-term outcomes and to greatly devalue long-term outcomes. Consistent with Figure 5.2, Treasury’s current 5% rate implies that a policy which delivers $8 of benefit today should be preferred to an equally expensive policy that delivers $1,000 of benefit in 100 years’ time. It is no wonder that the enhancement of future environmental (and social) benefits receives so little priority under current policy settings. The PCE’s recommendation that the social discount rate be revised for the analysis of long-term outcomes is of utmost importance and needs to be acted upon quickly.
“The PCE includes a nuanced discussion of the concept of ‘natural capital’, and also of its measurement and of its use in policy analysis. Our country’s natural capital has been greatly depleted by successive waves of human settlement. While natural capital is an important concept, its measurement is replete with difficulties. For instance, it makes little sense to aggregate spatially distinct aspects of natural capital. As an illustration, one cannot meaningfully aggregate water flows in two separate catchments to give an estimate of natural capital related to water. Thus many aspects of natural capital must be thought of as being defined locally (rather than nationally). This makes reporting of natural capital difficult. Instead of measuring disparate aspects of natural capital, it is more important to concentrate on ‘tipping points’ in which small changes in natural capital are likely to have outsized effects.
“Hence, the PCE’s emphasis on ‘tipping points’ is important. The proposal for “improving the quality of information available in the budget process to reflect what is known about future risks, uncertainty and tipping points” is one that should be adopted immediately. Environmental conditions can change in step fashion (i.e. non-linearly) once a threshold is reached, so that outcomes that have hitherto been adapting to environmental changes along a gradual path suddenly switch to a highly detrimental situation. Successive species extinctions in New Zealand are examples of such non-linear changes as breeding populations fall below a sustainable level.
“The PCE includes several practical recommendations which are worthy of adoption. For instance, the recommendation to extend “the wellbeing analysis template to better reflect the importance of the environment” is an important practical recommendation that should be implemented forthwith.”
Conflict of interest statement: “I acted as a reviewer of an earlier draft of this document.”
Dr Dennis Wesselbaum, Department of Economics, University of Otago, comments:
“This review focuses on studying the role the environment plays in constructing wellbeing budgets and, more generally, its place within the Living Standards Framework (LSF). The background for this is that the Labour Government is moving away from judging “success” by the growth rate of Gross Domestic Product (GDP) and uses a wider approach to measuring “success”. The LSF relates to the government’s goal in measuring and increasing wellbeing.
“Understanding the effect of environmental factors on wellbeing is incredibly difficult. While we all agree that clean air and water are important for wellbeing, it is less clear what the effect of species diversity or resilience is. Therefore, research on these links is much welcome and needed.
“The report makes nine recommendations varying from the short- to the long-run. While I agree with the spirit of these, I think that most of them are impractical. For example, one recommendation is to ensure that investment decisions accurately reflect the value derived from the environment. What is this value? How do we derive it? How robust is it to different assumptions? Similarly, another recommendation is to add new environmental values to an updated cost-benefit analysis. Again, this is an interesting and valuable idea, but I fail to see how this will be robustly done in practice. Finally, the most problematic recommendation is to adjust the social discount rate currently used to evaluate projects. There is an endless debate among academics about the “right” discount rate and there will not be agreement on what this rate should be. However, it has major implications for the value of a project. It therefore requires substantial and careful research to convince me that the current number is wrong and there exists a better number.”
No conflict of interest.